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Cases of Interest - May 12, 2003

1. Advanced Bionics v. Medtronic [Supreme Court of California. 3/5/03]
Employee covenant not to compete - jurisdiction - choice of law.

The Supreme Court of California on March 5, 2003, issued a modification of its prior decision in this case, but the modification did not affect the judgment. The prior decision of the California court had been issued in December 2002, and there had been an earlier related decision by the Minnesota Court of Appeals June 26, 2001.

The legal importance of the decision relates primarily to principles of judicial restraint and comity, but it also serves as a wake-up call with regard to employee non-competition agreements.

An employee (Stultz) working for Medtronic in Minnesota had signed a non-competition agreement when he was hired. On the day he terminated employment with Medtronic in Minnesota, he was hired by the California-based competitor Advanced Bionics. The next day, the employee and Advanced Bionics filed suit in California against Medtronic seeking a declaratory judgment that the non-competition agreement was unenforceable in California. Two days later, Medtronic initiated suit in Minnesota seeking a TRO against Advanced Bionics to prohibit them from employing Stultz. The Minnesota court issued its TRO prohibiting Advanced Bionics from employing Stultz, but five days later the California court issued its own TRO prohibiting Medtronic from taking action in courts outside of California. A week later, the Minnesota court enjoined Advanced Bionics from seeking relief in any other court outside Minnesota and ordered Advanced Bionics to vacate the California TRO. Instead, Advanced Bionics sought to have the California court sanction Medtronic for telling the Minnesota court about the California court's order.

Medtronic appealed the California trial court Order and the trial court was affirmed by the California Court of Appeals. The California Supreme Court however reversed, with several judges concurring, holding that the California trial court should not have enjoined Medtronic from proceeding in the Minnesota court because the underlying matter involved a Minnesota employer, and Minnesota employee with an agreement governed by Minnesota law.

It should be noted that the decision of the California Supreme Court came some eighteen months after the decision of the Minnesota Court of Appeals and yet the California Supreme Court stated:

"We also conclude, however, that the Minnesota action does not divest California of jurisdiction, and Advanced Bionics remains free to litigate the California action unless and until Medtronic demonstrates to the Los Angeles County Superior Court that any Minnesota judgment is binding on the parties."

Worthy of note is that apparently a provision of the notorious California Business and Professions Code provides that no non-competition agreement will be enforceable in California, and the California court decisions suggest that if the employee actually resides in California, the courts in California will apply California law regardless of what the agreement might specify as governing law.

One quote from the concurring opinion of one judge is irresistible. Please keep in mind, however, that this quote is from only one concurring opinion in which no one else joined. Justice Brown stated:

"Relocating to California may be, for some people, a chance for a fresh start in life but it is not a chance to walk away from valid contractual obligations . . . . We are not a political safe zone . . . such that the mere act of setting foot on California soil somehow releases a person from the legal duties our sister states recognize."

2. Minnesota State Archery Association I v. Minnesota State Archery Association [United States District Court, Minnesota. 3/20/03]
Trademarks. Trade Name.

This is a very straight forward decision but a rather bizarre set of facts. The Minnesota State Archery Association had existed since 1938 and first registered in Minnesota as a non-profit corporation in 1960. Forty-two years later they forgot to file a certificate of renewal and the Minnesota Secretary of State statutorily dissolved the entity.

At that point, an apparently disgruntled member, who had belonged to the Minnesota State Archery Association for several years went about incorporating a for-profit corporation using the name "Minnesota State Archery Association, Inc.," which was duly registered with the Minnesota Secretary of State. The disgruntled member, Mr. Helland, promptly sent a letter to the old association demanding that they cease and desist from using the name "Minnesota State Archery Association" or the initials "MSAA." Mr. Helland subsequently offered to either license use of the name to the old organization for ten years at $1,000.00 per year or to sell them the name for $10,000.00, provided that the old organization would pay his attorney's fees. When the old organization did not pursue such offers, Mr. Helland had his attorney send another cease and desist letter. At that point, the old organization, which was reincorporated as "Minnesota State Archery Association I" brought suit and moved for a preliminary injunction enjoining Helland and his company from using the trademarks "Minnesota State Archery Association" and "MSAA."

As noted, the court had no trouble in determining that the old organization which had utilized the two trademarks for over 40 years had common law trademarks well established so as to prevent Mr. Helland and his company from using those marks. Although Mr. Helland argued to the court that he had no intention of "competing," the court noted that there was ample evidence in the record that Mr. Helland had in fact stated that he intended to use the name and his new corporation to form an organization "inclusive" to all archers, "not just the ones that seem to meet some yet undefined criteria established by you and some board members."

Mr. Helland and his new corporation were represented by attorney Robert C. Friday of Maple Grove, Minnesota. A footnote in the court's opinion noted that the court refused to consider the unsigned and un-notarized Affidavit of Robert C. Friday, which had been improperly attached to the Defendants' Memorandum of Law.

3. Interactive Products v. a2z Mobile Office Solutions [CA 6. 4/10/03]
Trademark on Website "post-domain path."

"This case presents a novel trademark issue with regard to the Internet . . ." begins the decision of the Sixth Circuit. The defendant a2z had previously been an authorized dealer of the "Lap Traveler" portable computer stand for use in automobiles. The relationship with that manufacturer, however, terminated in January 1999, at which time the plaintiff manufacturer instructed the defendant to remove references to the "Lap Traveler" from a2z's website. The defendant a2z then began selling a competing product known as "The Mobile Desk" manufactured by the plaintiff's ex-business partner.

A2z posted an announcement on its website reading as follows:

"IMPORTANT ANNOUNCEMENT ABOUT THE LAP TRAVELER PRODUCT. The original Lap Traveler was co-developed by Doug Mayer and his ex-partner. They have split. A2z carries the redesigned and improved product - The Mobile Desk."

The URL for the a2z web page regarding The Mobile Desk displayed as follows:

"a2z solutions.com/desks/floor/laptraveler/dkfl-lt.htm."

The word "Lap Traveler" appeared in the post-domain path.

The Sixth Circuit held that the post-domain path of a URL does not typically signify source and therefore use of the trademark in that location did not violate trademark law.

By the way, it was the Sixth Circuit which only two months previously in its Paccar decision found infringement where the trademark was included within the domain name, but that decision also held that there was no infringement by having the trademark in metatags.

4. Air Products Canada [Canadian Domain Name Dispute Resolution. 4/15/03]
Canadian Domain Name Dispute Resolution - CDRP.

The complainant is a company known as Air Products Canada Limited. The domain name in dispute was "AirProducts.ca." The defendant was essentially a domain name speculator whose business plan was to exploit descriptive domain names. The defendant had in fact registered over 1,000 domain names for typically generic terms such as "foodproducts.ca."

The tribunal ruled in favor of the defendant essentially holding that the trademark was so "clearly descriptive" that the words alone could not be effectively monopolized by any one business. In deed, the Complainant's registered trademark included a design element and the Complainant had been required to disclaim the words "Air Products."

MSBA Computer Law Section Council Case Law Summaries
        April 2003

1. Specht v. Netscape (AOL) [CA2 10/1/02]. Electronic Contract Terms and Spyware.

This decision involved a class action suit against Netscape. The October decision simply refused Netscape's attempt to avoid the litigation moving to compel arbitration.

Netscape argued that its licensed terms required all disputes to be resolved by arbitration. The Court found that was true with regard to the basic Netscape products known as NAVIGATOR and COMMUNICATOR, but the Court held that the particular software program in question which was SMARTDOWNLOAD was not subject to the same license terms. Although Netscape clearly apprised customers of license terms regarding the NAVIGATOR and COMMUNICATOR products, and required click wrap agreement to those terms before those products could be downloaded, the Court held that such was not the case regarding the SMARTDOWNLOAD program. Rather, the Court found that visitors to the website were encouraged to click the button to download SMARTDOWNLOAD prior to ever seeing any notice that there would be license terms relating to that product, and unlike the other products, there was no requirement that the user do anything to show its assent to any license terms before downloading SMARTDOWNLOAD. Therefore, even assuming that the SMARTDOWNLOAD license contained an arbitrability provision, the Court held that Netscape failed to show that the plaintiffs had given any assent to be bound by such license provisions.

The present decision only involved Netscape's attempt to compel arbitration. It is interesting to note, however, that the underlying issue raised by the plaintiffs involves their claim that Netscape foisted upon them a "spyware" product which conducted electronic surveillance of their online activities and communicated such information back to Netscape. The plaintiffs argue that such spyware violates the Electronic Communications Privacy Act, 18 U.S.C. Section 2510 et. seq. and the Computer Fraud and Abuse Act, 18, U.S.C. Section 1030.

2. Wei Zhu v. Merrill Lynch [Canada case - Vancouver District Court 12/___/02]. Electronic Contract Terms and Conditions.

Merrill Lynch in this case got stuck for a judgment of approximately $10,000.00 because it could not prove up the terms and conditions of its electronic contract with its customer. Merrill Lynch had provided some form of website for customers to do stock trades. Mr. Wei Zhu was an educated computer programmer but, based upon telephone conversation transcripts, he spoke very little English. In any event, Mr. Zhu initiated a stock sale on the website but then almost immediately changed his mind and utilized a "button" on the site to cancel the transaction. He then received an electronic confirmation that the transaction had in fact been cancelled. Shortly thereafter he went ahead with the sale of the stock. Within a day or so Merrill Lynch claimed his account was "short" in that both sales had gone through. His attempt to cancel the first sale had not actually been effective. At Merrill's insistence, he acquired shares to cover his "short" position at a cost of over $10,000.00. Mr. Zhu then sued Merrill Lynch.

Merrill Lynch attempted to defend by asserting that the terms and conditions governing Mr. Zhu use of the website were set forth in an electronic contract, and those terms and conditions specifically provide that Merrill Lynch gave no warranties whatsoever and in no circumstance could be held liable for any damages. Mr. Zhu, of course, denied ever having been aware of any such contract terms. Unfortunately for Merrill Lynch, it was unable to establish that Mr. Zhu had ever seen or assented to such contract terms and, indeed, when Merrill attempted to illustrate to the Court how the website worked, the evidence indicated that the site did not in fact work the way Merrill Lynch claimed.

3. Cheaptickets.com [another Canadian case 1/21/03]. The first reported contested case under the Canadian Internet Domain Name Dispute Resolution Policy was resolved in favor of the defendant.

The Complainant was a travel agency known as Cheap Tickets and Travel Inc. having a place of business in Victoria, British Columbia, Canada which had done business since 1996. The Complainant provided evidence that it had obtained certain domain names including Cheap Tickets and Travel.com, Cheap Tickets Canada.ca, Cheap Tickets America.com, Cheap Tickets Britain.com and Cheap Tickets Australia.com.

The defendant originally registered the domain name in issue, "Cheap Tickets.ca" in 1999 "because it is in the business of developing websites around generic domain names."

The panel in this case noted that the Complainant's trademark was not registered in Canada until July 18, 2002, and took note of the descriptive nature of the term "Cheap Tickets." The panel held that the Complainant had simply not carried its burden of proof to show that it had a distinctive trademark in the words "Cheap Tickets" as of September 1999, when the defendant registered the domain name in issue. Accordingly, since the panel held that the Complainant had not established that "CHEAP TICKETS" was a trademark as of the domain name registration date, the Complainant could not succeed.

4. New York v. Network Associates, Inc., d/b/a McAfee Software [Supreme Court of New York 1/14/03]. Benchmark Test Restriction.

Elliot Spitzer, Attorney General for the State of New York, brought action against Network Associates alleging fraudulent, deceptive and illegal acts and practices. At issue was an attempt by Network Associates to enforce a provision on certain of its diskettes and on its website download page prohibiting disclosure of the results of any Benchmark tests to any third party. Notably, the actual license agreement accompanying the software did not contain such Benchmark restrictions. An online magazine in fact published a comparative review of certain products including one belonging to Network Associates. When the magazine sought permission of Network Associates to publish the review, the permission was refused by Network Associates. When the magazine went ahead and published the review, Network Associates protested such publication. As a result of that protest, the New York Attorney General commenced its investigation.

The Court permanently enjoined Network Associates from distributing, advertising and selling the software containing language suggesting "rules and regulations" prohibiting disclosing Benchmark tasks or publishing reviews.

Note that the apparent deception or fraud in the above case stemmed from the fact the license itself did NOT contain any restriction on disclosing Benchmark results. The problem was that Network Associates misled consumers into thinking that either the license or some other "rules and regulations" effectively prohibited such conduct.

5. Toys-R-Us v. Step Two Imaginarium.net [CA3, 1/27/03]. Cybersquatting jurisdiction-discovery.

Imaginarium had been doing business in the USA since 1985 with some 37 stores. It registered a U.S. trademark in 1989. In 1999, it was acquired by Toy-R-Us. The defendant, Step Two is a Spanish corporation that owns and franchises toy stores operating under the name "Imaginarium" in Spain and nine other countries, with a registered trademark in Spain in 1991 with first use in 1992. Interestingly, the Spanish company's stores use the same unique facade and logo as that used by Toys-R-Us.

Toys-R-Us registered the domain Imaginarium.com. Step Two registered the domain names Imaginarium.es, as well as Imaginariumworld.com and Imaginarium-World.com. Imaginariumnet.com, Imaginariumnet.net and Imaginariumnet.org. Step Two's websites are in the Spanish language. Two of Toys-R-Us employees who spoke Spanish were able to order toys from the Step Two websites, but those items were shipped to a Spanish address.

Toys-R-Us filed suit in Federal District Court in New Jersey alleging trademark infringement, unfair competition and cybersquatting. The District Court held that it did not have personal jurisdiction over the defendant and refused the Toys-R-Us request for jurisdictional discovery. The Court of Appeals reversed and remanded the case for limited jurisdictional discovery to determine if the U.S. Courts should properly exercise long arm jurisdiction.

6. Pragmatic C Software v. Antrim Design Systems [U.S. District Court Minnesota 1/28/03 Civil No. 02-2595]. Software license dispute; copyright infringement.

The plaintiff was a Minnesota software developer which terminated a software license and sued the user for copyright infringement and breach of the license agreement. The Court ordered a preliminary injunction which prohibited the defendant user from accessing the software.

The license in this case allowed the defendant user to sublicense to others provided that certain royalties were paid. The license provided that the licensor was to provide some limited support and improvements. The defendant user ran into financial problems and allegedly did not make certain royalty payments which were owing, but the defendant user claimed that the licensor had previously failed to honor its obligations of support and improvements. The licensor terminated the license due to the licensee's failure to pay royalties about the same time that the defendant user was acquired by the licensor's main competitor.

Interestingly, the defendant user was the first to sue. User sued in California State Court seeking a declaratory judgment regarding the licensor's alleged breach of failure to provide support and improvements. The State Court had no jurisdiction with regard to the licensor's copyright claim under federal law. Six weeks later the licensor initiated litigation in federal court in Minnesota claiming copyright infringement. Thus, one issue was whether the Minnesota Court should defer to the prior state court action in California. The Minnesota Federal Court did not defer

1. Pavlovich v. DVD CCA. [Supreme Court of California. 11/25/02]
Jurisdiction. Reverse Engineering. Trade Secrets.

In a 4-to-1 decision, the Supreme Court of California recently held that California did not have jurisdiction over Mr. Pavlovich, a Texas resident, who did not reside or work in California, and had never had any place of business, telephone listing, bank account, or other property in California. Nor had he solicited any business in California, or had any business contacts in California.

What Mr. Pavlovich did do, of course, was to post the source code of the program named DeCSS on a website allowing users to circumvent the CSS technology by decrypting data on DVD's and allowing the decrypted data to be place onto computer hard drives or other storage media.

With regard to the jurisdiction issue, the dissenting judge essentially indicated that by intentionally posting an unlicensed decryption code for CSS on the website, the defendant attacked the movie industry and the computer industry which were either centered in California or maintained a particularly substantial presence in California and, therefore, the dissent argued that Mr. Pavlovich's acts were "expressly aimed at California."

A recent article by Mr. Randy Kahnke on the Faegre & Benson website notes that U.S. Supreme Court Justice O'Connor had granted a stay in this matter, but shortly thereafter had lifted the stay. According to Mr. Kahnke, the California Supreme Court will now hear arguments in the case against another named defendant who is a California resident. The case remains of interest regarding issues of reverse engineering and trade secret protection.

2. Paccar v. TeleScan Technologies. [CA6 2/5/03]
Domain Names. Trademarks.

This case involved independent dealers using the famous brand names of diesel trucks on websites. The District Court had issued a far-ranging injunction, but on appeal, the Sixth Circuit vacated in part and remanded the case for further proceedings. The injunction prohibiting use of the trademarks within domain names was affirmed, but the injunction went too far in prohibiting use of the trademarks in metatags.

Paccar owned the trademarks in "PETERBILT" and "KENWORTH." The defendant owned various websites which provide truck locator services allowing consumers to search for new and used trucks such as "www.peterbiltusedtrucks.com." The Court noted that, in addition to utilizing the trademarks in its domain names, the defendant also displayed the trademarks in "wallpaper" on the websites and included the trademarks in metatags. Each website contained a disclaimer indicating that it had "no affiliation with any manufacturer whose branded products are listed herein."

Paccar initially sued in Federal Court in Washington, but that case was dismissed for lack of personal jurisdiction. Thereafter, TeleScan brought a declaratory judgment action in Federal Court in Michigan wherein Paccar counterclaimed alleging trademark infringement, among other things.

As noted above, the District Court initially granted a very broad injunction covering not only domain names, but metatags. The defendant asserted the defense of fair use or nominative use. The Court of Appears rejected that defense, noting that the defense would have merit if use by the defendant had simply been on the website, but in this case trademark use within the domain name went too far.

3. Taubman Company v. Webfeats. [CA6 2/7/03]
Domain Names. Trademarks.

This case involves elements of a cybersquatter and a "sucks" site. The American Civil Liberties Union filed an amicus brief.

It is interesting to note that apparently Taubman could have avoided litigating this case to the Federal Court of Appeals by simply paying $1,000.00 for the domain name, but after making that deal, Taubman reneged and chose to litigate.

The defendant was in the business of designing websites. He heard on the news that Taubman was planning to planning to build a shopping mall to be known as "THE SHOPS AT WILLOW BEND," so he registered the domain name "shopsatwillowbend.com" and created an internet website with that address giving information about the proposed mall together with a map and links to websites of various tenant stores. The website contained a prominent disclaimer indicating that it was "unofficial" and also provided a link to Taubman's official site at "theshopsatwillowbend.com."

Initially, the defendant's site included a web link to his girlfriend's site where she sold custom made shirts and also a link to his own site for his web design business. When Taubman discovered the defendant's site, Taubman demanded that the site be dismantled. When the defendant refused, Taubman promptly filed suit.

The defendant responded to the suit by registering five more domain names including "taubmansucks.com" and "theshopsatwillowbendssucks.com" on which sites the defendant provided a running editorial of his battle with Taubman and Taubman's lawyer.

The District Court initially granted Taubman's motion for a preliminary injunction prohibiting use of all the domain names. The defendant promptly appealed.

On appeal, the defendant attempted to argue lack of personal jurisdiction, but since he had been defending himself pro se, he had failed to preserve that defense by raising it in his original answer.

The Court noted that the Lanham Act only regulates commercial speech. The Court noted that the initial links on the defendant's sites to his girlfriend's shirt business and to his own website business did constitute commercial speech, but the Court also noted that those links had been removed voluntarily by the defendant by the time of the appeal. The Court then held that so long as there were no commercial links on the websites, the Lanham Act could not be properly invoked. The Court went on to discuss the fact that, given the disclaimer on the site and the link to the official site, there would be no likelihood that consumers would be confused as to the source of goods. As to the various "sucks" sites, the Court found that those were "purely an exhibition of free speech" not covered by the Lanham Act.

P.S. After the injunctions were initially issued, the defendant created at sixth complaint site or "sucks" site referring to the law firm representing Taubman.

4. Dluhos v. Strasberg. [CA3 2/20/03]
Domain Names. Arbitration.

This is another "cybersquatter" case of sorts, but it is noteworthy because of the process rather than the ultimate result.

The underlying facts involved a potential cybersquatter operating a website at "LeeStrasberg.com." The Estate of acting coach Lee Strasberg owns trademarks including "The Lee Strasberg Institute" and "Actor by Lee Strasberg." The Estate sent cease and desist letters to the defendant, but the defendant made no response. Accordingly, the Estate utilized the UDRP policy to initiate arbitration by NAF (National Arbitration Forum).

The defendant chose not to submit to the UDRP arbitration procedures and instead filed a complaint in Federal Court whereupon NAF suspended its proceedings. However, the defendant had failed to properly serve some of the Strasberg representatives who succeeded in having the NAF lift the suspension order and proceed with the UDRP dispute resolution arbitration.

The NAF panel issued its arbitration decision without the defendant participating and directed that the domain name be transferred to the Estate. The Federal District Court proceeded to review the NAF arbitration decision in favor of the Estate. The Court applied the Federal Arbitration Act standards giving substantial deference to the arbitrator's decision and, not surprisingly, the Court upheld the arbitration decision. In effect, the Federal District Court treated Dluhos' action as a motion to vacate a commercial arbitration award.

On appeal, the third circuit carefully reviewed the Federal Arbitration Act and the UDRP procedures to determine whether the UDRP proceeding qualified as an arbitration under the FAA so as to be entitled to deference. Not surprisingly, the Court of Appeals held that UDRP proceedings are not entitled to deference. The third circuit specifically found that the Anti-cybersquatting Consumer Protection Act (ACPA) was specifically enacted by Congress to provide a federal cause of action to challenge UDRP decisions. The court noted that the statute provides registrants with an affirmative cause of action to recover domain names lost in UDRP proceedings.

The Third Circuit therefore reversed and remanded for further proceedings indicating that the Third Circuit decision in no way reflected any suggestion that the NAF panel erred in its judgment.

5. COPPA Civil Penalties Accepted by Mrs. Field's Cookies and Hershey Foods. [2/27/2003]

On February 27, 2003 the FTC announced that Mrs. Field's Cookies would pay penalties of $100,000.00 and Hershey Foods would pay penalties of $85,000.00 due to violating FTC rules under the Children's Online Privacy Protection Act (COPPA).

The penalties in these matters were based upon failure to obtain verifiable parental consent before collecting personal information from children under age 13. Also, the sites allegedly failed to post adequate privacy policies which would have given direct notice to parents about the information being collected and how it would be used.

The Mrs. Field's sites were directed at children in that they involved birthday clubs for children 12 or under, whereby the children would receive birthday greetings together with coupons for free products. Although the personal information obtained was not disseminated to third parties, Mrs. Field's did collect personal information including full name, home address, e-mail address and birth date from over 84,000 children. The Hershey sites were candy-related sites directed to children. Those sites attempted to obtain parental consent, but the methodology did not meet the FTC criteria in that Hershey took no steps to assure that the parent or guardian actually saw the filled out consent forms. Interestingly, the FTC alleged that the site went ahead and collected the data from the children regardless of whether a parent purportedly signed the consent forms.

The FTC maintains a website at http://www.ftc.gov/kidzprivacy which contains information to help website operators understand their responsibilities under the COPPA Rule.

MSBA Computer Law Section Council Case Law Summaries
          by Gillian Uecker Rosenquist and Kim Shepherd
March 2002

TRADE SECRETS

DVD Copy Control  Assn v. Bunner (No. H021153, Cal. App. 11/01/2001) UPDATE:   On February 20, 2002, the California Supreme Court agreed to hear the appeal of the Appeals Court decision in DVD Copy Control  Assn v. Bunner.  The Appeals Court had reasoned that the code posted by Bunner on his website called DeCSS, which provides a method for playing encrypted DVDs on players not equipped with CSS (content scramble system) technology, was a written expression of ideas. Protection of trade secrets (Plaintiff claims CSS technology is their trade secret) must bow to the protection of free speech, the Court reasoned, and therefore, it overturned the lower court’s injunction.  The DVD Copy Control Assn argues that intermediate, not strict, scrutiny should have been applied as the Appeals Court failed to consider the functionality of code which makes code a mix of conduct and speech, not pure speech. 

CRIMINAL PROCEDURE

United States v. Bach, D. Minn Crim., No. 01-221 (12/14/01)

A state law enforcement officer must be present when a state warrant to search a suspect’s e-mail account is being executed by the internet service provider.  In this case, a police officer obtained a warrant based on probable cause that the suspect had evidence of child pornography in his e-mail account and later faxed a copy of his warrant to the suspect’s ISP.  Employees of the ISP searched the account and seized evidence.  Judge Magnuson acknowledged that while state officers are not bound by 18 U.S.C. §3105 (which requires that federal officers are present for third party searches), nonetheless, he reasoned that the Fourth Amendment required that an state officer be present at a search by a third party to make sure that constitutional protections are in place during that search when state warrants are executed.  The evidence was thus ordered suppressed at the defendant’s trial.

U.S. v. Ivanov, D. Conn., No. 3:00CR00183(AWT)(12/6/01)

The federal District Court could exercise subject matter jurisdiction over a computer hacker located in Russia under the Computer Fraud and Abuse Act (CFAA, 18 U.S.C. § 1030(a)(4)) because his actions effected and were intended to effect computers in Connecticut. The hacker, Alexsey Ivanov, was thus found to have "obtained…value" within the meaning of the CFAA by this exercise of control over computers which contained valuable data and attempting to extort money from their owner.  Ivanov had hacked into the computers of the Online Information Bureau, Inc., a facilitator of financial transactions for e-businesses, which contained data such as credit card numbers of customers and merchant account numbers.  He then sent e-mails to OIB indicating that he had found out their key passwords and insisting that they hire him to "check security" for approximately $10,000.  Merely viewing data in computers is not a crime under the CFAA, but the fact that Ivanov obtained information from OIB’s computers over which he exercised control was sufficient to find the "value" needed to charge him under the CFAA and confer jurisdiction.

CONTRACTS AND COPYRIGHTS

Softman Products Co. v. Adobe Systems Inc., C.D. Cal. No. 00-04161 DDP (10/19/01)

Despite a clause in Adobe’s shrinkwrap agreement prohibiting it, this California District Court ruled that Softman Products may resell Adobe Collection software (originally sold bundled) as single products under the first sale doctrine.  The court reasoned that the sale of the software was a sale of a good--personal property--under the Uniform Commercial Code, rather than a license of the intellectual property.  Furthermore, as Softman never loaded the software, it had not agreed to abide by the terms of the shrinkwrap agreement.  Finally, as far as the shrinkwarp agreement directly conflicts with the statutory first sale doctrine, the agreement must yield.  The judge stated that a "system of ‘licensing’ which grants software publishers this degree of unchecked power to control the market deserves to be the object of careful scrutiny."

Random House, Inc. v. Rosetta Books LLC, 150 F.Supp.2d 613 (S.D.N.Y. 2001)

Authors’ contracts with Random House giving it the rights to "print, publish and sell [their] works in book form" did not cover the new use of publishing the works in a digital, electronic form. Therefore, the Court refused to enjoin defendant Rosetta Books from publishing the works as e-books.  In the 1960s, authors including Kurt Vonnegut and William Styron entered into publishing contracts with Random House that gave the publisher rights to print and sell certain works in book form and license them in limited circumstances, but reserving rights such as foreign language translations to the authors.  In 2000, these authors entered into contracts with Rosetta Books which permitted Rosetta Books to publish digital e-book editions of the works that had interactive features.  Random House sued for copyright infringement, but the Court found that because the author’s contracts with Random House were not broad and e-books were not the same "medium" as printed books, e-books were a "new use" that did not fall under their agreements.  Therefore, Rosetta Books’ publication of the works in digital form as e-books was not copyright infringement.

WIRELESS TECHNOLOGY

National Cable & Telecommunications Assn, Inc. v. Gulf Power Co., S. Ct. No. 00-832 (1/16/02)

The U.S. Supreme Court ruled that the Federal Communications Commission (FCC) has the power under the Pole Attachments Act (47 U.S.C. § 224(b)) to set reasonable rates, terms and conditions for the attachment of high speed internet access cable lines and wireless telecommunications devices onto utility poles.  The Court read the Act closely, noting that it provides for FCC controls when any attachment is made by a cable television provider, regardless of whether that attachment is for cable or internet services. Furthermore, the Court reasoned that a "telecommunications provider" under the Act includes wireless carriers.  Generally, the Court acknowledged its willingness to give deference to a federal agency such as the FCC where statutes are silent or vague, and in this case, upheld both FCC determinations of its authority to regulate internet attachments by cable providers and attachments by wireless carriers to utility pole.

Patent Case Law Update--Computer Law Focus
Mid November – December 2001

By Dan Tysver

ON-SALE BAR: READY FOR PATENTING STANDARD

Mere conception does not make an invention "ready for patenting" for purpose of the on-sale bar, even though the conception was written in a form that included all elements shown in the claims and eventually is shown to be workable. It was relevant that the inventor did not know whether the concept could be made to work. Space Systems/Loral Inc. v. Lockheed Martin Corp.

DISCLOSED BUT UNCLAIMED METHOD STEPS

A method step that is disclosed in the specification but not claimed is not automatically dedicated to the public under the 1996 Maxwell case. This Federal Circuit decision held that Maxwell is limited to an analysis under the doctrine of equivalents. Here, the claimed method was infringed literally. The defendant’s inclusion of an additional method step that was disclosed but not claimed in the patent did not help them avoid literal infringement. This issue is before the Federal Circuit, en banc, in Johnson & Johnston Assoc. Co. v. R.E. Service Co., which has not yet been decided. Smith & Nephew Inc. v. Ethicon Inc.

FESTO

Amending a claim to include new language that was inherent in the existing language was not a narrowing claim amendment, and therefore was not affected by the Festo decision. The original claim disclosed "an ellipse." The amendment described the ellipse as "having a major diameter," which is an inherent characteristic of all ellipses. Bose Corp. v. JBL Inc.

Festo affects a narrowing claim amendment made during a reexamination proceeding. Moreover, to the extent that the same claim limitation is found in unaltered, original claims, these claims are also covered by Festo and are not susceptible to analysis under the doctrine of equivalents.

MEANS-PLUS-FUNCTION INTERPRETATION

Means-plus-function language must be interpreted according to the structure revealed in the specification and the file history. "Gripping means" does not cover a single clamp where only a double clamp was revealed in the Specification. J&M Corp. v. Harley-Davidson Inc.

COMPUTER MODELS AS FACTUAL EVIDENCE

A computer model used by an expert to show that a patented pharmaceutical was present during the defendant’s manufacturing process was insufficient to avoid a summary judgment motion for non-infringement. The computer model was not supported by factual foundations or assumptions that had been established in the record. Novartis Corp. v. Ben Venue labs Inc.

READING THE SPECIFICATION INTO THE CLAIMS

Claim meaning is not limited to the specification’s description of the preferred embodiment, even where there was no description in the specification of the broader claim meaning. Rexnord Corp. v. Laitram Corp.

The SDNY held that the best mode included in the specification can be used to limit a claim when the invention is nothing more than the best mode itself. The court basically held that the plain meaning of the patent claim is that shown in the best mode. Brookhill-Wilk 1 L.L.C. v. Intuitive Surgical Inc.

CERTIFICATE OF CORRECTION

Certificate of correction cannot be used to correct any mistake that broadens a claim. Superior Fireplace Co. v. Majestic Products Co.

FESTO DISTINGUISHED BY CAFC PANEL

Amazingly, the panel (Lourie, writing for a unanimous panel) held that changing the claim term "output signals" to "output transform calculation signals" was not a narrowing amendment that created prosecution history estoppel, as in Festo. "Thus, the amendment was not made for a "substantial reason related to patentability,"" the court stated.

They affirmed a jury verdict of equivalents infringement based on this finding.

The court explained that the added words did nothing more than make express what had been implicit in the claims as originally worded.

The court also upheld a finding of no literal infringement under

35 U.S.C. Section 112 Paragraph 6 for lack of an identical function in the accused product, thus specifically implicating the doctrine of equivalents as the legal basis for the result. (Interactive Pictures Corp. v. Infinite Pictures Inc., Fed. Cir., No. 01-1029, 12/20/01 patent (5,185,667)).

This follows closely after the Bose v. JBL case (Bose Corp. v. JBL Inc., Fed. Cir., No. 01-1054, 12/17/01). in which a claim amendment that added a term inherent in the existing language merely provided an antecedent for later claim language without narrowing the claim for Festo estoppel.

In Bose, affirming a denial of a summary judgment, the court would not apply prosecution history estoppel to an amendment that added at the end of the original claim language "said boundary being defined by an ellipse" the phrase ------having a major diameter---. The court said that a mathematically inherent characteristic of an ellipse is a major diameter, so nothing was apparently changed.

Claim Interpretation

FESTO DOESN’T BAR DOCTRINE OF EQUIVALENTS USE IF AMENDMENT WAS NOT NARROWING

An amendment to a patent during prosecution did not preclude an equivalents infringement claim under "Festo" if the amendment does not narrow the literal claim scope, the U.S. Court of Appeals for the Federal Circuit found. In reversing a district court finding, the appellate court also said that an amendment to the claim on a sealing device rendered the claim invalid because it added new matter that was not supported by the original specification of the application. The court thought the disclosure was "inherent" in the original specification, even though the added configuration may have been obvious from the original. TurboCare Division of Demag Delaval Turbomachinery Corp. v. General Electric Co. August 29, 2001(Dkt. 00-1349)

INTERPRETATION DEPENDS ON WHAT "OR" MEANS

The Federal Circuit says the term "or" in claims for a traffic radar processing system in which an operator searches the strongest target signals was properly construed to mean a choice of either signal, but not both. Kustom Signals Inc. v. Applied Concepts Inc. September 5, 2001 (Dkt No. 99-1564)

DEFINING CLAIM BY INVENTION'S PURPOSE IS ERROR

Construing claim terms according to the purpose of the invention is proper only if there are functional limitations in the claim, the U.S. Court of Appeals for the Federal Circuit holds. In a patent infringement case involving solid dishwashing detergent "casts," the appellate court rules that the district court erred by construing the term "substantially uniform" to include the functional requirement of forming a homogeneous wash solution throughout the life of the claimed cast because the purpose of the invention suggested it. A summary judgment of literal infringement was reversed, but the case was remanded to determine the relevance of an affidavit to the scope of protection. Relevant quote: "In view of the foregoing, i.e., the claim language, written description, and prosecution history, we presume that "substantially uniform" as related to "alkaline detergent cast" means what it says, "largely, but not wholly the same in form," Judge Linn wrote. There is no support in the claim language, the syntax of the claim, the written description, the prosecution history, or the case law, for the addition of functional language to this phrase." Ecolab Inc. v. Envirochem Inc. September 6, 2001 (Dkt No. 00-1402)

FUNCTION OF INVENTION SHOULD BE APPARENT FROM THE CLAIMS

The function of a claimed invention (for purposes of applying the function-way-result test under the doctrine of equivalents) may not be drawn from the specification and must instead be claimed as such, according to the Federal Circuit. Toro Co. v. White Consolidated Industries Inc. September 21, 2001 (Dkt No. 00-1561)

EN BANC CAFC CONSIDERS DISCLOSED BUT UNCLAIMED SUBJECT MATTER – DEDICATED TO THE PUBLIC IF UNCLAIMED?

The Federal Circuit EN BANC hears oral argument on whether unclaimed subject matter that is disclosed in a patent specification is dedicated to the public or whether it may be available for a doctrine of equivalents infringement claim. The case involves a printed circuit board found to infringe because it uses steel substrates disclosed in the specification of the patent, even though the patent claims only aluminum substrates. The en banc panel will decide whether there is a conflict between the Federal Circuit's rulings in Maxwell v. J. Baker and YBM Magnex Inc. v. International Trade Comm'n on this issue. Johnson & Johnston Assoc. Co. v. R.E. Service Co. July 16, 2001 (Fed Cir, 238 F.3d 1347) (1998 U.S. Dist. LEXIS 13142)

DOES PALM INFRINGE WITH GRAFITTI?

Defective factual predicates led to an erroneous ruling below that the handwriting recognition system in the popular "Palm Pilot" computers does not infringe a patent on "unistroke" text recognition, the U.S. Court of Appeals for the Federal Circuit holds. Xerox Corp. v. 3Com Corp October 5, 2001 (Dkt No. 00-1464)

MEANS PLUS FUNCTION INTERPRETATION

1. The scope of a means-plus-function claim may be determined by a disclaimer in the prosecution history of a structure that could otherwise be asserted as equivalent to a disclosed structure, the U.S. Court of Appeals for the Federal Circuit holds. Ballard Medical Products v. Allegiance Healthcare Corp. October 9, 2001 (Dkt No. 00-1393)

2. A disclosed structure corresponding to a function recited in a means-plus-function limitation must actually perform the recited function, not merely enable a claimed device to operate as intended, the U.S. Court of Appeals for the Federal Circuit rules. Asyst Technologies Inc. v. Empak Inc. October 10, 2001 (Dkt No. 00-1514)

3. The scope of equivalents for a means-plus-function patent claim is limited by the specification's written description and by the prosecution history, the U.S. Court of Appeals for the Federal Circuit rules. J&M Corp. v. Harley-Davidson Inc. November 2, 2001 (Dkt No. 00-1295)

Use of Patent Rights

Repair (that’s not infringement) may mean more than you thought.

The permissible repair doctrine is not limited to the replacement of broken or worn parts, the U.S. Court of Appeals for the Federal Circuit rules. Surfco Hawaii v. Fin Control Systems Pty. Ltd. September 5, 2001 (Dkt No. 00-1356)

Section 271(g) (IMPORTATION)INFRINGEMENT LIABILITY DOES NOT APPLY TO RESEARCH METHODS

The court dismissed an infringement action challenging the importation and sale of a drug developed abroad using the patented screening method. If Section 271(g) were applicable to patents claiming screening methods, any products subjected to those methods in foreign countries would infringe those patents upon importation of the product into the US, even though the screening was done abroad. Bayer AG v. Housey Pharmaceuticals Inc. October 17, 2001 Delaware D. Ct. 2001 U.S. Dist. LEXIS 17905

Section 271(f) INFRINGEMENT LIABILITY INCLUDES SUPPLYING CHEMICAL 'COMPONENTS'

Infringement under 35 U.S.C. Section 271(f) includes shipping "components" of a patented chemical composition out of the United States for combination abroad, the U.S. District Court for the Southern District of New York holds. However, the court finds no violation of Section 271(f)(1) because the defendant supplied only a single component of the claimed composition. The court also refuses to apply the statute to shipments between foreign countries. Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer Inc. S. D. Ct. NY 2001 U.S. Dist. LEXIS 16895,  October 18, 2001

Powers of the Court vs. the PTO

DISTRICT COURT LACKS POWER TO CORRECT THE ORDER INVENTORS APPEAR LISTED ON PATENT

The Federal Circuit holds that Section 256 gives courts power to order correction only for errors of misjoinder or nonjoinder, and Section 255 provides only for correction of clerical errors, the appellate court rules, and thus the District Court is not empowered to order a correction of this order. Fina Technology Inc. v. Ewen September 17, 2001 (Dkt No. 00-1578)

PTO CAN CORRECT ERRONEOUS AMENDMENT

The Patent and Trademark Office has discretion to correct a patent application amendment that erroneously instructs the agency to cancel all claims (which it did in order to preserve the applicant's compliance with the filing requirements), the U.S. Court of Appeals for the Federal Circuit holds. Exxon Corp. v.Phillips Petroleum Co. September 20, 2001 (Dkt No. 00-1173)

BUT SPELLING ERRORS CANNOT BE CORRECTED IF THE CORRECTION BROADENS CLAIM AND ERROR IS NOT EVIDENT

A mistake in a claim, the correction of which broadens the scope of coverage of that claim and is not clearly evident from the specification, drawings and prosecution history, is not a "mistake of a clerical or typographical nature" subject to correction under 35 U.S.C. Section 255, the Federal Circuit holds. In affirming a summary judgment that a certificate of correction was invalid, the court says that a mistake, the correction of which broadens a claim, is not a "minor mistake" subject to correction under the same statute. Judge Timothy Dyk dissented. Superior Fireplace Co. v. Majestic Products Co. November 1, 2001 (Dkt No. 00-1233)

NEVERTHELESS, OBVIOUS ERRORS IN PTO FILES CAN BE POINTED OUT AND FACTORED INTO SPECIAL MASTER REPORT

In deciding an inequitable conduct claim related to conduct during the prosecution of certain patents, inventors' due process rights were not violated by the report of a special master interpreting an article and presumption of patent office regularity because the PTO file was out of compliance with the PTO rules (its MPEP). Bristol-Myers Squibb Co. v. Rhone-Poulenc Rorer, Inc., October 2, 2001, 2001 U.S. Dist. LEXIS 15618

Patent Law Civil Process

Tests that Experts perform may not be good enough to sway the Court.

Tests performed on accused products by a defendant's expert did not prove non-infringement because they were not performed under normal operating conditions, the U.S. Court of Appeals for the Federal Circuit pointing out that an accused device may be found to infringe if it is reasonably capable of satisfying the claim limitations, even though it may also be capable of non-infringing modes of operation. The court vacated a summary judgment of non-infringement, but affirmed a summary judgment that the accused infringer was not licensed to use the claimed invention Hilgraeve v. Symantec September 17, 2001 (Dkt No. 00-1373)

If you lose an argument over claim interpretation, don’t bring it back as an invalidity argument.

The Federal Circuit affirmed a refusal to allow the addition of an invalidity charge under 35 U.S.C. §112 ¶1 after the district court issued its claim construction, three and one-half years after the suit was filed. The ruling came in a decision that affirmed a summary judgment that a patent on a rapid exchange angioplasty catheter was willfully infringed. Advanced Cardiovascular Systems Inc. v. Medtronic Inc. September 10, 2001 (Dkt No. 00-1417)

DECLARATORY ACTION TO DE-LIST DRUG PATENT DOES NOT ARISE UNDER PATENT ACT

The Patent Act does not authorize a declaratory judgment action to delist a new drug patent from the Food and Drug Administration "Orange Book" in order to permit market approval of a generic version of that drug, the Federal Circuit holds as a matter of first impression, reversing a summary judgment to remove a listed drug patent. The claim is not a patent infringement cause of action. Mylan Pharmaceuticals v. Thompson v. Squibb October 12, 2001 (Dkt No. 01-1257)

ATTORNEY MUST DISCLOSE POTENTIAL ON-SALE BAR (Duty to investigate)

A patent attorney who is aware of information regarding a potentially patent-barring event may not fail to investigate that information in an effort to avoid the duty to disclose, the Federal Circuit holds, Affirming an attorneys' fee award based on inequitable Conduct. failure by inventors and attorneys to timely investigate and disclose a potential on-sale bar to the Patent and Trademark Office established deceptive intent. Questionable information provided to the attorneys in this case triggered a duty to investigate. Brasseler U.S.A. I LP v. Stryker Sales Corp. October 9, 2001 (Dkt No. 00-1194)

UNQUANTIFIED ATTORNEY FEE AWARD NOT APPEALABLE TO CAFC AS 'FINAL DECISION'

An unquantified award of attorneys' fees in an exceptional case under 35 U.S.C. Section 285 is not a "final decision" that is appealable to the Federal Circuit as under 28 U.S.C. Section 1295(a)(1), the U.S. Court of Appeals for the Federal Circuit holds, at least until the amount of liability was quantified. Special Devices Inc. v. OEA Inc. October 26, 2001 (Dkt No. 01-1053)

DEFENDANT HAS NO JURY TRIAL RIGHT ON PATENT INVALIDITY IN Section 271(E)(2) ACTION

A defendant has no right to a jury trial on its counter-claim of patent invalidity in an infringement suit brought under 35 U.S.C. Section 271(e)(2) for seeking pre-market approval for a generic drug, the U.S. District Court for the Northern District of Illinois holds, relying on the Federal Circuit's recent decision in Tegal Corp. v. Tokyo Electron America Inc. to find that the absence of a damages claim by the plaintiff is determinative. The court points out that Section 271(e)(2) authorizes the claim of "technical infringement" but expressly precludes a claim for damages. Glaxo Group Ltd. v. Apotex Inc. N.D. Ill October 12, 2001, 2001 U.S. Dist. LEXIS 16873 (Prior history 130 F. Supp. 2d 1006)

Validity

INDEFINITENESS DOES NOT DEPEND ON UNDERLYING ISSUES OF FACT

The legal issue of patent invalidity for indefiniteness is a proper subject for summary judgment because it does not depend on underlying issues of fact, the U.S. Court of Appeals for the Federal Circuit holds, contrary to Exxon’s argument. The court states that the indefiniteness determination flows from claim construction so any extrinsic evidence as to what a person skilled in the art would understand does not constitute evidentiary findings that would preclude summary judgment. Still, the court reverses the summary judgment of indefiniteness invalidity, pointing out that the presumption of validity enjoyed by issued patents tips the balance in close cases involving problematic claim drafting. (I think the court found a better argument than the advocate here). Exxon Research and Engineering Co. v. U.S. September 19, 2001 (Dkt No. 00-5077)

CLAIM WITH ALTERNATIVES WAS ANTICIPATED BY PRIOR ART USING ONE ALTERNATIVE

A patent claim that presented three alternative formats for a Year 2000 computer conversion was anticipated by a prior art system that uses one of those formats, the U.S. Court of Appeals for the Federal Circuit holds. The court, saying "That which infringes if later anticipates if earlier," notes that the claim as written would be infringed by the prior art system with only one of the three alternative formats. Judge Paul Michel dissents, arguing that the patent at issue taught an apparatus with additional functionality not disclosed in the allegedly anticipating prior art. Judge Paul Michel dissented, apparently saying that the patent at issue claimed an apparatus with additional functionality that the prior art did not disclose. Brown v. Air Products and Chemicals Inc

COURT WRONGLY OVERTURNED VERDICT OF "INVALIDITY FOR LACK OF ENABLEMENT"

A district court improperly overturned a jury verdict which held that invalidity for lack of enablement was not proved for a patent covering a method of producing human growth hormone, the U.S. Court of Appeals for the Federal Circuit holds. Reversing a judgment as a matter of law, the court finds that the district court usurped the jury's fact-finding function where the parties' experts differed not on the science but on inferences drawn where there was no scientific certainty. Bio-Technology General Corp. v. Genentech Inc. September 27, 2001 (Dkt No. 00-1223)

IT’S NOT POSSIBLE, BUT IF IT WERE, IT WAS ALREADY KNOWN

Two patents for cutting fuses in semiconductor chips are invalid because the disclosed explosion mechanism was impossible, or, if possible, was inherent in the prior art, the Federal Circuit says. In finding that the patent claims are invalid for anticipation and obviousness as inherent in the prior art, the court declines to require that this inherency be recognized by one of ordinary skill in the art because the missing descriptive material constituted theoretical mechanisms or rules of natural law. A person of ordinary skill does not need to recognize that a method or structure behaves according to a law of nature in order to fully and effectively practice that method or structure, according to the court. EMI Group North America Inc. v. Cypress Semiconductor Corp. September 21, 2001 (Dkt No. 00-1508)

PRIOR INVENTOR CHALLENGING PATENT NEED NOT KNOW THAT HE WAS AN INVENTOR OF A PATENTABLE INVENTION

A prior inventor challenging the validity of a patent under 35 U.S.C. Section 102(g)(i.e., claiming prior invention by one other than the patent’s named inventor) need not have known that he was an inventor, the U.S. Court of Appeals for the Federal Circuit holds. Affirming a summary judgment of invalidity under 35 U.S.C. Section 102(g), the court says that the defendant's prior invention of the claimed method for producing polyethylene foam was not suppressed, concealed or abandoned. It’s irrelevant whether the defendant knew that it had produced a legally patentable invention for purposes of Section 102(g). Dow Chemical Co. v. Astro-Valcour Inc. September 28, 2001 (Dkt No. 01-1003r)

DOCUMENTARY EVIDENCE NOT NEEDED TO CORROBORATE INVENTOR’S REDUCTION TO PRACTICE, SOMETIMES.

Corroboration of an inventor's testimony about reducing his invention to practice need not include documentary evidence of test results, the U.S. Court of Appeals for the Federal Circuit holds. Loral Fairchild Corp. v. Matsushita Electrical Industrial Co. September 21, 2001 (Dkt No. 00-1487)

OFFER TO SELL TRIGGERS Section 102(b) BAR IF EVEN ONLY ONE EMBODIMENT IS INCLUDED

The on-sale bar is raised even if the patent's claim limitations are satisfied by only one of the invention's embodiments included in the offer to sell, says the U.S. Court of Appeals for the Federal Circuit. In affirming a summary judgment of invalidity, the court finds a "commercial offer for sale" in spite of the fact that the offer made before the critical date was not accepted. The court applies the Supreme Court's decision in Pfaff v. Wells to find the subject invention ready for patenting. Scaltech v. Retec/Tetra. October 23, 2001 (Dkt No. 01-1005)

SECTION 102(b) ON-SALE BAR APPLIES TO SUPPLIERS

The on-sale bar to patentability in 35 U.S.C. Section 102(b) does not allow for a "supplier" exception, the U.S. Court of Appeals for the Federal Circuit holds. It does not matter who placed the invention on sale, only that someone--an inventor, supplier, or other third party--did so. Special Devices v. OEA. October 26, 2001 (Dkt No. 01-1053)

BROCCOLI SPROUTS WITH INHERENT PRIOR ART PROPERTIES WON’T HAVE VALID CLAIMS

Method patents on the production and consumption of broccoli seed sprouts, which are rich in previously unknown but naturally occurring cancer fighting substances, are invalid for anticipation, the U.S. District Court for the District of Maryland holds. In a summary judgment, the court finds that the claim language describes ONLY properties of the seeds that are inherent in the prior art or describes intended results that are non-limiting. The court says the claims describe nothing more than the long-known process of germinating and harvesting the sprouts. In re Cruciferous Sprout Patent Litigation, August 8, 2001, 2001 U.S. Dist. LEXIS 17271

Congressional actions

SENATE CONFIRMS PROST FOR FEDERAL CIRCUIT

The Senate confirms the nomination of Sharon Prost as judge for the U.S. Court of Appeals for the Federal Circuit to replace Judge S. Jay Plager, who retired to part-time senior status last December.

REPORT ON STATE IMMUNITY FINDS FEW IP CASES AGAINST STATES SINCE 1985

A report by the General Accounting Office finds few accusations of intellectual property infringement made against states either through the courts or administratively. The report, requested by Sen. Orrin Hatch(R-Utah), follows up on a Supreme Court decision that the potential for state acts of infringement was not significant enough to justify legislation that abrogated 11th Amendment immunity.

NEVERTHELESS, JOINT BILLS APPEAR TO RESTORE RIGHT TO SUE STATES FOR IP INFRINGEMENTS

Sen. Patrick Leahy (D-Vt.) and Reps. Howard Coble (R-N.C.) and Howard Berman (D-Calif.) introduce identical bills (S. 1611 and H.R. 3204 ) to restore to intellectual property owners the right to bring infringement actions against the states.

SENATE JUDICIARY COMMITTEE CONSIDERS ROGAN NOMINATION FOR PTO HEAD

The Senate Judiciary Committee scheduled a hearing in November on the nomination of former Rep. James Rogan (R-Calif.) to be Under -Secretary of Commerce for Intellectual Property and Director of the Patent and Trademark Office.

HOUSE PASSES PTO AUTHORIZATION ALLOWING AGENCY TO KEEP USER FEES

The House passes authorization legislation (H.R. 2047) that would allow FY 2002 funding for the Patent and Trademark Office at an amount equal to all patent and trademark fees collected that year!!! The bill also requires the PTO Director to develop a five-year strategic plan for enhancing agency operations. (Note: The Congress has been siphoning off PTO fees into the general fund for years now. This is a break with the past).

Report submitted by Michael Atlass

by Gillian Uecker Rosenquist and Kim Shepherd

Trademarks

Microware Systems Corporation v. Apple Computer Inc., 8th Circuit No.00-2006SI (Jan. 16, 2001); to be published. Microware registered and uses the mark OS-9 for real-time operating systems. Apple uses MAC OS 9 for personal computers. The Court of Appeal upheld the lower court's granting of summary judgment for Apple because "OS" with a number is customarily used to describe the current version of an operating system and the products are sold in different markets.

Domain Names

Kramen, et al. v. Cohen. et al., N.D. Ca. No. C-98-20718 (Feb. 6, 2001).A federal judge ordered that the income generated by any of a defendant's web sites/businesses be collected to satisfy a judgment for monetary damages against the defendant based on his operation of another site/business at another domain. In an earlier ruling the judge had ruled that the defendant illegally gained control of the domain sex.com and operated it for 5 years;he then awarded the plaintiff $25 million dollars in damages. In order to collect, the court is going after income generated from the defendant's other domains, including sex.net, kinkymate.com, and nastydate.com. The case is being appealed to the 9th Circuit.

Virtual Works, Inc. v. Volkswagen of North America and Network Solutions,Inc., 4th Cir. No. 00-1356 (Jan. 22, 2001). In an analysis under the ACPA that began as a suit for declaratory judgment, the court found that Virtual Works, who had registered the domain "vw.net" in 1996, had registered it in bad faith and transferred the domain to Volkswagen. Virtual Works registered the domain and used it for 2 years in connection with its ISP services, but did so knowing that "VW" was famous for Volkswagen and discussing the possibility of selling it to Volkswagen in the future for "a lot of money." Despite the legitimate business use of the domain before Volkswagen contacted them about purchasing it, the court found that the "safe harbor" provision of the ACPA (having a belief or reasonable grounds to think that the use of the domain was fair and lawful) did not apply to Virtual Works because of their awareness of Volkswagen's rights in the VW mark.

Copyrights

Matthew Bender & Co. v. West Publishing Co., 2d Cir. No. 00-0729(L), Jan.23, 2001).In the ongoing battle over the scope of West Publishing's rights in posted and annotated court opinions, the Second Circuit has overturned the district's court's award of $800,000 in attorneys' fees to Hyperlaw (owned by Bender), who prevailed in the infringement suit. The Court said that the district court had inappropriately invoked Section 403 of the Copyright Act(the section allows for a defense of "innocent infringement" where the plaintiff did not use a copyright notice identifying which portions of the work are government works not subject to copyright).

Patents

Amazon.com, Inc. v. Barnesandnoble.com, Inc. , Fed. Cir No. 00-1109 (Feb.14, 2001).The district court's granting of a preliminary injunction to Amazon.com was overturned by the Federal Circuit on the grounds that Barnes & Noble showed that it had "mounted a substantial challenge to the validity" of Amazon.com's One-Click patent. However, the court agreed with the lower court that Amazon.com was likely to prevail on its patent infringement claims.

On January 2, 2001, Bloomberg News reported that Mitsubishi Electric hasa greed to pay royalties under a patent license for memory chip designs and chipsets to Rambus. Micron Technology, Infineon Technologies and Hyundai Electronics are suing Rambus over rights to chip technology. Story available at news.cnet.com/news/0-1003-200-4351979.html?tag+st.ne.1002.bgif.ni

Internet

Rural/Metro Corporation v. John/Jane Does 1-4, N.D. Ca. No. C-00-21283EA1. A Motion to Quash Third-Party Subpoenas to Yahoo! Inc. was filed by the Electronic Frontier Foundation on behalf of the Does. Rural/Metro claims libel and that trade secrets may have been reveled in postings by the Does as part of a public discussion about Rural/Metro. Rural/Metro subpoenaed Yahoo! Inc. to reveal the names of the Does, now known only by their online monikers.

Randall Stoner v. eBay Inc. (California Superior Court (San Francisco) No.305666 (Nov. 7, 2000). Summary judgment granted to eBay under 47 USC Sec.230 (Communications Decency Act). eBay found to be immune from liability for the sale of illegal recordings because eBay is an "interactive computer service provider" as defined by Sec. 230.

In 1999, Polk County (Florida) prosecutors had charged a local couple with promoting obscene material for appearing nude on the Internet. The married couple had sold nude pictures of themselves to an Arizona company who in turn had posted the pictures on the Internet. In exchange for agreeing to not take part in any "sexually connected" businesses in Polk or nearby counties in the next four years and a payment of $2000 to the Polk County Sheriff's Office, prosecutors dropped the charges. The case is notable because this may be the first case in which prosecutors were to use "community standards" for obscenity in an Internet pornography case. Chachere, Vickie, "Porn Case Dropped Against Couple," Silicon Valley News/Associated Press (Feb. 9, 2001), available at www0.mercurycenter.com/svtech/news/ap/docs8281821.htm.

- Last Updated 11/20/04 -